Sebi tweaks rules to allow FII entry in infra funds

IDFC, IIFCL, Srei plan schemes to cash in on easier regulations

A clutch of foreign institutional investors (FIIs) such as California Public Employees Retirement System (CalPERS) and sovereign funds like Norges Bank and Temasek has become eligible to invest in infrastructure development funds (IDFs) after Sebi tweaked rules to induce fund flows into infrastructure.

Amending the rules on Friday Sebi widened the definition of strategic investors to include FIIs and non-banking financial institutions (NBFCs) registered with RBI.

A total of 1,758 FIIs are registered with Sebi. They include big firms like Fidelity and Blackstone and foreign pension funds managing retirement funds of big companies such as Rolls-Royce, IBM, British Petroleum and Unilever.

Three IDFs that have received Sebi approval — IDFC, IIFCL and Srei — can now roll out schemes to gain from the easier rules, industry officials say.

Other changes in rules include an up to two-year extension of the scheme beyond the original tenure if two-thirds of its investors by value consent. Besides, a new fund offer can now be open for 45 days, instead of 15 days so far.

Success of IDFs is important as India plans to spend $1trillion in the next five years, of which 40 per cent is expected to come from the private sector.

Himanshu Pandya, vice president and products head of ICICI Prudential AMC, said a good number of FIIs would become eligible to invest in IDFs. “After the changes in the rules, the salability and marketability of the schemes have improved a big way,” he said. ICICI Prudential AMC filed a draft document to launch its IDF on November 2 last year.

Hemant Kanoria, CMD of Srei Infrastructure Finance, said his company received the Sebi approval to launch an IDF last November. He said the move to allow FIIs to invest in IDFs would be good for the IDF as well as mutual fund industry.

A senior IIFCL official told Financial Chronicle that it planned to launch its IDF in March. “Sebi has asked for certain conditions to be met in terms of software and IT infrastructure. We are setting them up,” the official said. Initially it would be a Rs 1,500 crore fund. “We are in touch with some deep players like SBI, PFC and Srei Infrastructure as strategic partners,” he said.